The major changes have happened on the inside. The sensor has been upgraded from 10.1 to 12.1 megapixels, but remains the same size, 1/2.3 inches. This is very small, a size usually found in compact cameras, but then most of the FZ38's rivals use this sensor size too, and as we'll see later it doesn't seem to cause a problem. The f/2.8 - f/4.4 18x zoom Leica lens is also the same as the FZ28, and since the sensor size is unchanged it retains the same focal length range, equivalent to 27-486mm. I'm glad to see that Panasonic has resisted the temptation to chase after Olympus with its 26x zoom SP-590UZ.
One of the major improvements is in the optical image stabilisation, which is now known as Power OIS. It's always hard to judge the performance of IS systems accurately, but I was able to take shake-free shots at some very slow shutter speeds, as low as 1/25th of a second at the full extent of the zoom, which is nearly four stops of extra stability.
Another improvement is the face detection system, which now incorporates automatic face recognition. The way that it works is, I think, slightly creepy. Every time you take a picture that includes someone's face, the camera stores that face. If it recognises the same face in more than a few shots, it will prompt you to register a name for that person, and will then each time they appear in a photo the camera will optimise the focus and exposure to concentrate on that person. Up to six people can be recorded, with three face views per person for faster recognition. It's almost as though the camera is watching, and remembering…
The most significant improvement is of course the video mode, although let's not forget that the FZ28 also has 1280 x 720 30fps HD video recording. What the FZ38 adds is stereo audio and recording in the high-quality AVCHD Lite format, like the Lumix TZ7. The back of the camera now sports an extra button which starts video recording, although there is a delay of about a second and a half, so plan ahead if you don't want to miss the start. There is also a new addition to the mode dial, a creative movie mode which allows manual aperture and shutter speed control, which is a nice feature. As well as this the zoom lens can be used during video recording, with a dual-speed control for slow, smooth zooms.
Panasonic is really pushing the FZ38's video abilities in its press campaign, and with good reason. It's not quite the perfect hybrid of still and video camera, because there's no such animal, and it can't match the full HD 1920 x 1080 resolution of the Canon SX1 IS, but it certainly has the best video mode in its likely price range.